What You Should Expect From Ford’s Q1 Earnings Report

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Last April, Ford (NYSE:F) reported its first quarter 2019 earnings. With strong demand for its pickup trucks, the company beat analyst expectations and F stock surged 8%. Ford is expected to report its Q1 2020 earnings after the bell on April 28. Investors can expect a big move for the stock in the aftermath, but with the damage dealt by the novel coronavirus, it’s not likely to be a repeat of 2019’s gain.

F Stock: What You Should Expect From Ford's Q1 Earnings Report

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An early sign of what might be in store for Ford investors came on March 25. Standard & Poor’s Financial Services downgraded Ford’s credit rating to junk status. S&P also warned there was a 50% chance that rating could be lowered further over the next 90 days.

What About Cheap Gas?

One of the sideshows that has been going on at the same time as the coronavirus pandemic has been an oil price war. Saudi Arabia and Russia have been locked in a pricing and production volume battle at the same time the pandemic has resulted in a big drop in demand.

The oil price war has rocked American shale oil producers, but it’s also had a big impact at the gas pumps. At this time last year, regular was going for $2.84 per gallon. The average price at the pumps right now is $1.85 per gallon. In theory, dramatically lower gas prices should spur sales of SUVs and trucks — the kind of vehicles Ford is focused on these days. Not only that, but March is traditionally the busiest month of the quarter for new vehicle sales.

However, with many of its dealerships closed down because of the coronavirus lockdown, and consumers worried about finances, the company has been unable to parlay cheap gas into sales. A Ford VP told CNBC:

“Looking at the quarter, it started out really well … March was actually going really good until the 10th, … and then as we started getting states going to shelter-in-place, then we started feeling a much more profound impact.” 

Ford Releases Preliminary Results

Auto makers are obviously feeling the effect of the coronavirus. Consumers are sheltering in place, and many car dealerships are closed. Production of new vehicles has been shut down. In addition, unemployment has rapidly hit record levels — over 22 million workers have been laid off in the past month alone. You can’t watch TV without seeing an ad for a car company willing to make or delay car payments for you.

However, online sales and incentives can only do so much in this environment. General Motors (NYSE:GM) announced that because of the shutdown beginning in March, its Q1 deliveries were down 7% compared to last year. Fiat Chrysler Automobiles (NYSE:FCA) saw U.S. Q1 sales decline by 10%. Ford experienced an even greater impact. The company reported U.S. sales down 12.5% for the quarter.

That steep decline led Ford to issue a warning about its Q1 earnings last week, when it released preliminary results. The company says it expects to see revenue decline 15.7% year-over-year, and a pre-tax loss in the neighborhood of $600 million. The company is suspending quarterly dividend and share buyback programs. To weather the coronavirus storm, Ford says it has about $30 billion in cash, including the $15.4 billion it borrowed last month.

The one bit of good news? Ford says its joint venture factories in China are once again producing cars. 

Bottom Line for F Stock

No one is expecting Ford to deliver positive news on April 28. The only real question is how bad it’s going to be. The company’s preliminary results from last week suggest it’s not likely to be pretty. With its Friday close at $5.12, F stock has posted a 16% gain since the start of April, and its up 28% since being clobbered during the March market selloff.

Going into an earnings report next week that’s going to be short of good news, now is probably not the time for a Ford investment. 

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.  As of this writing, he did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/f-stock-what-to-expect-from-ford-q1-earnings/.

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